Sept. 25 (Bloomberg) -- BAE Systems Plc Chief Financial
Officer Peter Lynas is favorite to hold the same post at the
enlarged group should a merger with European Aeronautic, Defence
& Space Co. succeed, people familiar with the discussions said.

BAE Chief Executive Officer Ian King would lead the
combined defense business, while Linda Hudson would remain in an
equivalent position as head of BAE Systems Inc., the U.S.
subsidiary of the London-based company, said the people, who
asked not to be identified because the appointments have not
been announced. A representative for BAE declined to comment.

Keeping the BAE executive trio intact would give the U.K.
defense company more heft in its combination with larger EADS.
While EADS CEO Tom Enders has said he wants to build a company
divorced of government ties, he must draw up a politically
palatable merger plan to gain state backing. The U.K. government
can veto a change in ownership of BAE, which would be the junior
partner in the merged entity with 40 percent.

“The two companies are making a case, a strong case, in
favor of this merger,” U.K. Deputy Prime Minister Nick Clegg
said in an interview with Bloomberg Television, adding that
there are also “concerns” about the transaction. “I
personally have always been in favor, over time, of greater
consolidation in the European defense industry. I think that’s
the trend and has been for a long period of time.

While neither company has publicly commented on the
composition of key management, Enders is expected by analysts to
remain at the helm, with Fabrice Bregier retaining his post as
CEO of the Airbus SAS subsidiary. EADS and BAE have said the
company would have a dual listing, and keep the U.S. business
separate to comply with U.S. security clearance.

Board Seats

Lynas, whose testimonial on the BAE website states that
“you’re only as good as the people you work with,” took over
as finance director of BAE at the end of 2010. BAE Chairman Dick
Olver hasn’t commented on his role in a future company, while
EADS Chairman Arnaud Lagardere has said previously that he wants
to eventually sever ties with EADS, in which his namesake
publishing company owns 7.5 percent.

Naming Lynas as CFO would force current EADS Finance Chief
Harald Wilhelm to take a step back. Enders consolidated
financial oversight of EADS and Airbus, its largest unit, this
year by giving Wilhelm both positions. Almost a decade Lynas’s
junior, Wilhelm may return as CFO later should the role go to
the BAE executive for now, one of the people said.

Changing Fortunes

King and Lynas both worked at Marconi Electronic Systems,
which merged with British Aerospace Plc in 1999 to create BAE in
its current form. BAE has lost about a third of its value under
King, who took over in September 2008. At that time, BAE trumped
EADS by market value, a relationship that has since been
reversed. The U.K. company has cut about 17,000 jobs under
King’s tenure as orders in Europe dried up.

“The beauty of the transaction for BAE is that it is
losing itself in a bigger group,” Pierre-Yves Gauthier, head of
strategy at Paris-based Alphavalue said in a telephone
interview. “Their long-term outlook is not strong.”

BAE and EADS run their U.S. companies under special boards
to get Pentagon security clearance. The security arrangements
the U.S. will insist on for a combined company will not emerge
until after a firm merger proposal is submitted for review.

The two companies have until Oct. 10 to spell out merger
plans or ask for an extension. Hudson, in a note to employees,
said that the deal could take months to complete.

“Such deals are complex business transactions --
internationally even more so,” she said.